SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): May 3, 2018
TUESDAY MORNING CORPORATION
(Exact Name of Registrant as Specified in Charter)
|(State or Other Jurisdiction of Incorporation)||(Commission File Number)||(I.R.S. Employer Identification Number)|
|6250 LBJ Freeway, Dallas, Texas 75240|
|(Address of Principal Executive Offices) (Zip Code)|
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
|Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:|
|[ ]||Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)|
|[ ]||Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)|
|[ ]||Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))|
|[ ]||Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition.
On May 3, 2018, Tuesday Morning Corporation, a Delaware corporation (the "Company"), issued a press release announcing its financial results for the third fiscal quarter and nine month period ended March 31, 2018. The information furnished in this Item 2.02 – “Results of Operations and Financial Condition” of this Current Report on Form 8-K and the press release attached hereto as Exhibit 99.1 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of such section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
On May 3, 2018, Tuesday Morning Corporation, a Delaware corporation (the "Company"), issued a press release announcing its financial results for the third fiscal quarter and nine month period ended March 31, 2018.
The information furnished in this Item 2.02 – “Results of Operations and Financial Condition” of this Current Report on Form 8-K and the press release attached hereto as Exhibit 99.1 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of such section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
Item 9.01. Financial Statements and Exhibits.
Exhibit Number Description 99.1 Press Release of Tuesday Morning Corporation dated May 3, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|TUESDAY MORNING CORPORATION|
|Date: May 3, 2018||By:||/s/ STACIE R. SHIRLEY|
|Stacie R. Shirley|
|Executive Vice President, Chief Financial Officer and Treasurer|
|99.1||Press Release of Tuesday Morning Corporation dated May 3, 2018|
Tuesday Morning Corporation Announces Third Quarter Fiscal 2018 Results
DALLAS, May 03, 2018 (GLOBE NEWSWIRE) -- Tuesday Morning Corporation (NASDAQ:TUES), one of the original off-price retailers currently with over 720 stores across the United States specializing in name-brand, high quality products for the home, selling luxury textiles, furnishings, housewares and seasonal decor, today announced financial results for the third quarter and nine months ended March 31, 2018.
Steve Becker, Chief Executive Officer, stated, “Our third quarter results demonstrate the progress we are making against our strategic initiatives. As expected, the third quarter marked an inflection in our gross margin performance as we delivered almost a 300 basis point year-over-year improvement. Our focus on turning inventory faster, improving the overall inventory allocation across our store base, offering great values and a consistent flow of deals is delivering a better customer experience, all of which have contributed to improved comparable store sales. Looking ahead, we are well positioned to continue executing against our strategies to set the foundation for long-term profitable growth at Tuesday Morning.”
Third Quarter Fiscal 2018 Results of Operations
Nine Months ended March 31, 2018 Results of Operations
The Company ended the third quarter of fiscal 2018 with $12.3 million in cash and cash equivalents. The Company had $44.4 million outstanding under its line of credit with availability on the line of $67.0 million. Inventories at the end of the third quarter of fiscal 2018 were $245.0 million compared to $268.3 million at the end of the third quarter of fiscal 2017, a decrease of $23.3 million or 8.7%. The decrease in inventory was driven primarily by lower distribution center and in-transit inventory levels, due in part to the Company’s continued supply chain and inventory management improvements. The Company’s inventory turnover for the trailing five quarters as of March 31, 2018 was 2.7 turns, an improvement of approximately 13% from the trailing five quarter turnover as of March 31, 2017 of 2.4 turns.
Fiscal Year 2018 Outlook
The Company expects comparable store sales for fiscal 2018 to increase 3% to 4%. Gross margin is expected to show year over year improvement in the fourth quarter, though to a lesser extent than that realized in the third quarter. The Company continues to expect significant projected EBITDA improvement in the fourth quarter and in fiscal 2018. Net capital expenditures are expected to be in the range of approximately $23 million to $26 million in fiscal 2018, with a continuing focus on real estate strategy for new stores, relocations and expansions of existing stores, and IT infrastructure and enhancements.
About Tuesday Morning
Tuesday Morning Corporation (NASDAQ:TUES) is one of the original off-price retailers specializing in name-brand, high quality products for the home, selling luxury textiles, furnishings, housewares and seasonal decor. Based in Dallas, Texas, the Company opened its first store in 1974 and operates over 720 stores in 40 states. More information and a list of store locations may be found on the Company’s website at www.tuesdaymorning.com.
Conference Call Information
Tuesday Morning Corporation’s management will hold a conference call to review third quarter fiscal 2018 financial results and provide a general business update today, May 3, 2018, at 8:00 a.m. Central Time. A live webcast of the conference call will be available in the Investor Relations section of the Company’s website at www.tuesdaymorning.com, or you may dial into the conference call at (877) 312-5376 (no access code required) approximately ten minutes prior to the start of the call. A replay of the webcast will be accessible through the Company’s website for 90 days. A replay of the conference call will be available from 11:00 a.m., Central Time, May 3, 2018 through 10:59 a.m., Central Time, Sunday, May 6, 2018 by dialing (855) 859-2056 or (404) 537-3406 and entering conference ID number 7990088.
Non-GAAP Financial Measures
This press release includes financial measures that are presented both in accordance with U.S. generally accepted accounting principles (“GAAP”) and using certain non-GAAP financial measures, EBITDA and Adjusted EBITDA. For more information regarding the Company’s use of non-GAAP financial measures, including the definition of EBITDA and Adjusted EBITDA, and a reconciliation to net income/(loss), the most directly comparable GAAP measure, see “Non-GAAP Financial Measures” within this press release.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements, which are based on management’s current expectations, estimates and projections. Forward-looking statements typically are identified by the use of terms such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “estimate,” “intend” and similar words, although some forward-looking statements are expressed differently. You should consider statements that contain these words carefully because they describe management’s current expectations, plans, strategies and goals and management’s current beliefs concerning future business conditions, future results of operations, future financial position, and their current business outlook or state other “forward-looking” information. Forward-looking statements in this press release also include, but are not limited to, statements of management’s current plans and expectations in this press release and statements in the “Outlook” section of this press release. Forward-looking statements also include statements regarding management’s sales and growth expectations, EBITDA and Adjusted EBITDA projections, liquidity, capital expenditure plans, inventory management plans, productivity of the Company's store base, real estate strategy and their merchandising and marketing strategies.
Reference is hereby made to the Company’s filings with the Securities and Exchange Commission, including, but not limited to, "Cautionary Statement Regarding Forward-Looking Statements" and "Item 1A. Risk Factors" of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017, for examples of risks, uncertainties and events that could cause our actual results to differ materially from the expectations expressed in our forward-looking statements. These risks, uncertainties and events also include, but are not limited to, the following: our ability to successfully implement our long-term business strategy; changes in economic and political conditions which may adversely affect consumer spending; our failure to identify and respond to changes in consumer trends and preferences; our ability to continuously attract buying opportunities for off-price merchandise and anticipate consumer demand; our ability to successfully manage our inventory balances profitably; our ability to effectively manage our supply chain operations; loss of, disruption in operations, or increased costs in the operation of our distribution center facilities; unplanned loss or departure of one or more members of our senior management or other key management; increased or new competition; our ability to successfully execute our strategy of opening new stores and relocating and expanding existing stores; increases in fuel prices and changes in transportation industry regulations or conditions; our ability to generate strong cash flows from operations and to continue to access credit markets; increases in the cost or a disruption in the flow of our imported products; changes in federal tax policy; the success of our marketing, advertising and promotional efforts; our ability to attract, train and retain quality employees in appropriate numbers, including key employees and management; increased variability due to seasonal and quarterly fluctuations; our ability to maintain and protect our information technology systems and technologies and related improvements to support our growth; our ability to protect the security of information about our business and our customers, suppliers, business partners and employees; our ability to comply with existing, changing, and new government regulations; our ability to manage litigation risks from our customers, employees and other third parties; our ability to manage risks associated with product liability claims and product recalls; the impact of adverse local conditions, natural disasters and other events; our ability to manage the negative effects of inventory shrinkage; our ability to manage exposure to unexpected costs related to our insurance programs; our ability to mitigate reductions of customer traffic in shopping centers where our stores are located; and increased costs or exposure to fraud or theft resulting from payment card industry related risk and regulations. The Company’s filings with the SEC are available at the SEC’s web site at www.sec.gov.
The forward-looking statements made in this press release relate only to events as of the date on which the statements were made. Except as may be required by law, the Company disclaims obligations to update any forward-looking statements to reflect events and circumstances after the date on which the statements were made or to reflect the occurrence of unanticipated events. Investors are cautioned not to place undue reliance on any forward-looking statements.
TUESDAY MORNING CORPORATION
NON-GAAP FINANCIAL MEASURES
The Company defines EBITDA as net income or net loss before interest, income taxes, depreciation, and amortization. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items, including certain non-cash items and other items that the Company believes are not representative of its core operating performance. These measures are not presentations made in accordance with GAAP. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income or loss as a measure of operating performance. In addition, EBITDA and Adjusted EBITDA are not presented as, and should not be considered as, alternatives to cash flows as a measure of liquidity. EBITDA and Adjusted EBITDA should not be considered in isolation, or as substitutes for analysis of the Company’s results as reported under GAAP and Adjusted EBITDA should not be construed as an inference that the Company’s future results will be unaffected by such adjustments. The Company believes it is useful for investors to see these EBITDA and Adjusted EBITDA measures that management uses to evaluate the Company’s operating performance. These non-GAAP financial measures are included to supplement the Company’s financial information presented in accordance with GAAP and because the Company uses these measures to monitor and evaluate the performance of its business as a supplement to GAAP measures and believes the presentation of these non-GAAP measures enhances investors’ ability to analyze trends in the Company’s business and evaluate the Company’s performance. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry. The non-GAAP measures presented in this press release may not be comparable to similarly titled measures used by other companies.
Reconciliation of GAAP Net Loss to Non-GAAP Adjusted EBITDA:
The following table reconciles net loss, the most directly comparable GAAP financial measure, to EBITDA and Adjusted EBITDA, both of which are non-GAAP financial measures:
|(unaudited - in thousands)||Three Months Ended|
|Nine Months Ended|
|Net loss (GAAP)||$||(8,080||)||$||(14,796||)||$||(11,642||)||$||(15,221||)|
|Depreciation and amortization||6,363||5,659||19,087||15,635|
|Interest expense, net||485||370||1,450||1,028|
|Income tax provision/(benefit)||(23||)||101||(431||)||113|
|Share-based compensation expense (1)||784||908||2,729||3,224|
|Cease-use rent expense (2)||(396||)||87||398||560|
|Phoenix distribution center related expenses (3)||—||59||—||2,196|
|Stockholder nominations related expenses (4)||—||—||408||—|
|Gain on sale of assets (5)||—||(185||)||(371||)||(556||)|
|Adjusted EBITDA (non-GAAP)||$||(867||)||$||(7,797||)||$||11,628||$||6,979|
(1) Adjustment includes charges related to share-based compensation programs, which vary from period to period depending on volume and vesting timing of awards. The Company adjusts for these charges to facilitate comparisons from period to period.
(2) Adjustment includes accelerated rent expense recognized in relation to closing stores prior to lease termination. A favorable lease buyout agreement was negotiated and executed in the third quarter of fiscal 2018, resulting in the reversal of previously recorded accelerated cease-use rent expense. While accelerated rent expense may occur in future periods, the amount and timing of such expenses will vary from period to period.
(3) Adjustment includes only certain expenses related to the Phoenix distribution center preparation, ramp up and post go-live activities, including incremental detention costs and certain consulting costs.
(4) Adjustment includes only certain incremental expenses which relate to the stockholder nominations as described in the Company’s Preliminary and Definitive Proxy Statements filed with the SEC on September 25, 2017 and October 5, 2017, respectively.
(5) Adjustment includes the gain recognized from the sale-leaseback transaction which occurred in the fourth quarter of fiscal 2016.
|Tuesday Morning Corporation|
|Consolidated Statement of Operations|
|(In thousands, except per share data)|
|Three Months Ended March 31,||Nine Months Ended March 31,|
|Cost of sales||142,993||135,845||511,922||492,546|
|Selling, general and administrative expenses||88,092||81,834||275,445||265,628|
|Other income, net||179||360||907||1,104|
|Loss before income taxes||(8,103||)||(14,695||)||(12,073||)||(15,108||)|
|Income tax provision/(benefit)||(23||)||101||(431||)||113|
|Earnings per share|
|Net loss per common share:|
|Weighted average number of common shares:|
|Consolidated Balance Sheets|
|March 31,||June 30,||March 31,|
|Cash and cash equivalents||$||12,277||$||6,263||$||3,747|
|Other current assets||1,245||1,982||259|
|Total Current Assets||264,754||236,518||279,703|
|Property and equipment, net||122,115||118,397||107,021|
|Deferred financing costs||750||986||1,065|
|Liabilities and Stockholders' Equity|
|Income taxes payable||77||11||104|
|Total Current Liabilities||130,528||111,597||120,325|
|Borrowings under revolving credit facility||44,400||30,500||41,000|
|Asset retirement obligation — non current||3,100||2,307||2,518|
|Other liabilities — non current||835||1,027||360|
|Total Liabilities and Stockholders' Equity||$||390,400||$||358,153||$||390,034|
|Consolidated Statement of Cash Flows|
|Nine Months Ended March 31,|
|Cash flows from operating activities:|
|Adjustments to reconcile net loss to net cash provided by operating activities:|
|Depreciation and amortization||19,087||15,635|
|Amortization of financing costs||236||247|
|(Gain)/loss on disposal of assets||(69||)||1|
|Gain on sale-leaseback transaction||(371||)||(555||)|
|Deferred income taxes||(571||)||—|
|Construction allowances from landlords||6,688||1,419|
|Change in operating assets and liabilities:|
|Prepaid and other assets||883||(427||)|
|Income taxes payable||71||105|
|Other liabilities — non-current||367||(338||)|
|Net cash provided by/(used in) operating activities||17,802||(31,118||)|
|Cash flows from investing activities:|
|Purchase of intellectual property||(30||)||(4||)|
|Proceeds from sale of assets||69||93|
|Net cash used in investing activities||(25,513||)||(27,270||)|
|Cash flows from financing activities:|
|Proceeds under revolving credit facility||153,900||152,200|
|Repayments under revolving credit facility||(140,000||)||(111,200||)|
|Change in cash overdraft||(60||)||7,000|
|Purchase of treasury stock||—||8|
|Proceeds from exercise of common stock options||4||(23||)|
|Payments on capital leases||(119||)||-|
|Net cash provided by financing activities||13,725||47,985|
|Net increase/(decrease) in cash and cash equivalents||6,014||(10,403||)|
|Cash and cash equivalents, beginning of period||6,263||14,150|
|Cash and cash equivalents, end of period||$||12,277||$||3,747|
Farah Soi / Caitlin Morahan
MEDIA: Blynn Austin
Perry Street Communications